For months now, various nations around the world have struggled with keeping the inflation of FIAT currencies in check – one such nation being the Republic of Turkey. As a result, citizens of these nations have been turning to cryptocurrencies in droves, in an attempt to avoid seeing their earning and savings greatly devalued. Unfortunately for these savvy individuals, the Republic of Turkey has just seen its Central Bank issue a complete ban on certain use cases of cryptocurrencies.
The Ban in Turkey
In the announced crackdown on the use of cryptocurrencies, the Central Bank of the Republic of Turkey (CBRT) has targeted not only end users, but service providers as well. The bank made this clear by indicating that,
- Crypto assets cannot be used directly or indirectly for payments
- No service can be provided for direct or indirect use of crypto assets in payments
Justifying this ban, the CBRT indicated that crypto assets pose the following risks.
- they are neither subject to any regulation and supervision mechanisms nor a central regulatory authority,
- their market values can be excessively volatile,
- they may be used in illegal actions due to their anonymous structures,
- wallets can be stolen or used unlawfully without the authorization of their holders, and
- transactions are irrevocable.
Interestingly, it would appear that despite restricting on/off ramps and payments with cryptocurrencies, trading activity is not mentioned – perhaps leaving an overlooked channel for enthusiasts to continue exposure to the sector.
Upon news breaking of the ban on cryptocurrencies by the CBRT, the entire crypto market saw a swift contraction. While the timing of the markets pull-back would seem to coincide with this announcement by the CBRT, there are various other factors which may have influenced the move.
The primary reason being that both BTC and ETH are coming off of all-time-highs mere hours prior, possibly resulting in traders taking profits. Furthermore, the much-anticipated public listing of Coinbase has now come and gone – along with the market hype surrounding the move. The result could simply be a case of ‘buy the rumour, sell the news’.
With most assets showing a modest decline of roughly 3-5%, any of the above reasons could be contributing factors to this activity.
Similar Actions Taken
If the stance taken by the Central Bank of the Republic of Turkey sounds familiar, that is because it is. For multiple years now, a similar battle against cryptocurrencies has been waged by the Central Banks of both Nigeria and India.
The events which have occurred in India are particularly interesting, as they highlighted the fact that Central Banks are not ‘all-powerful’. When the Royal Bank of India (RBI) attempted to impose various restrictions on the use of cryptocurrencies, the nations Supreme Court subsequently ruled that they were indeed legal for use – a decision which resulted in the RBI backstepping on its stance. While unlikely, perhaps there is a chance that with enough public outcry, the citizens of Turkey could work towards a similar goal of having the CBRT overturn its decision.